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hanacat6174
02.12.2019 •
Business
Westford corporation has $185 million dollars of interest-bearing debt outstanding at the end of fiscal 2014 year. in addition, the company incurred $26 million dollars of interest expense in 2014.
if the company has a marginal tax rate of 35% calculate westford's cost of debt capital.
a) 14.1%
b) 9.1%
c) 9.8%
d) 11.1%
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Ответ:
B) 9.1%
Explanation:
Cost of debt is the interest rate paid by a company due to borrowing money; i.e debt from investors.
$185million in debt is the face value of debt that Westford Corporation had and the $26 million dollars of interest expense is the cost of the debt in dollars;
First, find pretax cost of debt ;
Pretax cost of debt = (Interest expense / Face value of debt )*100
= (26,000,000/ 185,000,000 )*100
=0.1405 *100
= 14.05%
Next, use pretax cost of debt to find after-tax cost of debt;
After-tax cost of debt = Pretax cost of debt (1-tax)
= 14.05% *(1-0.35)
= 9.13%
Therefore, Westford's cost of debt capital is 9.1%
Ответ:
B. It is difficult to record points made during a meeting on an electronic slide.